Watch out world, the U.S. is on the march. No, not like that. We’re talking the good ol’ American greenback.
The dollar hit a one-month high against the yen and a two-week high versus the euro on Wednesday, buoyed by a sharp slide in oil prices and a recovery in stocks.
And there’s more reason to believe the dollar could become stronger.
Philadelphia Federal Reserve President Charles Plosser, a known hawk, said on Tuesday that rising inflation could force the Fed to start raising interest rates even before labor and financial markets recover.
With so much bullish momentum behind the dollar how should you trade?
One thing to watch explains Tim Seymour, Fast Money’s favorite international trader, are the TIPs. They show expectations on inflation in the US are coming down. The yield on the 5-year TIP has doubled in the last week.
I think you could see the US stamp out inflation faster than the rest of the world, Seymour adds. That suggests there’s good support for a stronger dollar.
I agree, adds Joe Terranova. I’d play the dollar from the long-side buying the dips. I don’t think you can go wrong with that.